The Commissioners for HMRC v De Freitas
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Asplin |
| Judgment Date | 06 May 2016 |
| Neutral Citation | [2016] EWHC 1433 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CH/2015/0044 |
| Date | 06 May 2016 |
[2016] EWHC 1433 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Rolls Building
7 Rolls Buildings
Fetter Lane
London EC4A 1NL
Mrs Justice Asplin DBE
Case No: CH/2015/0044
Mr T Nersession appeared on behalf of the Claimant
Mr Pavlovich appeared on behalf of the Defendant
This is an appeal from the decision of Registrar Briggs which was made on 24 August 2015. On that occasion, the Registrar dismissed the bankruptcy petition which had been issued by HM Revenue and Customs against Mr David De Freitas and, in doing so, also refused an application for an adjournment for the filing of further evidence. This related to a bankruptcy petition which was presented on 29 April 2015 in respect of Mr De Freitas. The petition debt comprised unpaid self-assessment tax, interest and penalties amounting to £89,731.06. There had been a previous statutory demand of 28 August 2014, although there is, and remains, a live issue in relation to whether or not that was served in the usual way.
In fact, the petition first came before the court on 15 June 2015 and was adjourned to 24 August. By a notice of 17 August, pursuant to Rule 6.21 of the Insolvency Act 1986, Mr De Freitas had filed full notice of intention to oppose the petition. He had also enclosed a witness statement which was, in fact, dated 12 August but was included with that notice of 17 August. It contained his evidence in opposition to the petition and, for the most part, it set out a chronology of events, including the correspondence which had taken place with the Revenue.
At the second hearing on 24 August, an officer of HMRC appeared on its behalf and sought an adjournment of eight weeks to file and serve evidence in reply to the notice of opposition. The hearing was in the usual list and, therefore, was to be dealt with in relatively short order. The petition was heard by Registrar Briggs who dismissed it with no order as to costs.
The appellant, HMRC, seeks permission to appeal on a variety of grounds. The ones I have been referred to today are, firstly, that it is unfair to HMRC that the matter was dismissed in that way because there was no chance to file further evidence and make submissions. Mr De Freitas' evidence had only come in a week before and the statutory demand point had been raised, it is said, for the first time on that occasion. In fact, I have been referred by Mr Pavlovich to correspondence which shows that that point had been raised back in July. It is also said under ground 1 that, in fact, the decision that was made was made on the evidence which was only from Mr De Freitas which was, obvioiusly, it is said, unfair. On the other hand, it is said, in Mr De Freitas' evidence which was so compelling that it needed an answer by way of further evidence.
The second ground is that there was confusion in the mind, therefore, of the Registrar between ADR and adjudication and that, as a result, he made some fundamentally incorrect conclusions upon which he based his reasoning. They are said to be, first of all, that it was wrong to say that the process was underway. In fact, it was not underway. There had been what might be called an ADR process which had been rejected by the appropriate office because it did not fit within the statutory parameters. There had also been the further two-stage process which had been completed on 9 July and it is said that the ball was in Mr De Freitas' court to bring the matter before the Adjudicating Officer and, in fact, that had not commenced at the date on which Registrar Briggs heard this matter. That process was not begun until January of this year, 2016. It is said, therefore, that the Registrar was wrong in that regard.
It is also said that the Registrar was wrong Mr De Freitas was waiting for a letter before he could start the adjudication process. It is said, in that regard, the notice of opposition records that the previous two-stage process had come to an end by the letter of 9 July 2015 and so Mr De Freitas could have started the adjudication process but had not done so. I was taken through the relevant correspondence in that regard and I will come back to the transcript, itself.
The third ground of appeal is Section 284 of the Insolvency Act 1986. It is said the Registrar, in his reasoning, relied on what he said was the devastating blow which would be caused to Mr De Freitas by the effect of Section 284. As I say, I will turn back to the discussion which was had in this regard but it said that those conclusions, to which the Registrar came, were also inaccurate because Section 284, itself, does not cause a bank account to be frozen immediately on the issue of presentation of the bankruptcy petition. In this case, the bank accounts of the respondent were not frozen. In fact, the effect of Section 284 is that transactions are void if and when, in fact, the person is adjudged bankrupt and it relates back to the presentation of the petition, itself. It is said that that is not the way in which it was described by the Registrar.
My attention was also directed to Section 284(5) which provides that:
"Where after the commencement of his bankruptcy, the bankrupt has incurred a debt to a banker or other person by reasoning of the making of a payment which is void under the this Section, that debt is deemed for the purposes of any of this group or parts to have been incurred before the commencement of the bankruptcy unless the banker or person had notice of the bankruptcy before the debt was incurred or it is not reasonably practicable for the amount of the payment to be recovered from the person to whom it was made."
Mr Nersession, on behalf of the Revenue, says that the Registrar was also wrong to say that it would have the effect, necessarily, of freezing the bank account and there was no freezing here. He also points out that the whole matter could have been dealt with by way of validation orders and that, therefore, there was not the serious threat which the Registrar seemed to take into account in his reasoning. He said there was no evidence of any effect at all on Mr De Freitas' bank accounts and so it was not reasonable or within the Registrar's discretion to take the view which he did. In relation to Section 284, Mr Nersession also says if that were the case, then it would render the usual procedure in these matters otiose because Section 284 applies in every case and if that were its effect, then on each occasion, a petition would be dismissed because of the perceived prejudice which it would then be suggested that Section 284 caused. Therefore, it is said that no petition would ever get off the ground.
The fourth ground is that the Registrar failed to take into account numerous matters. They were, for example, that these were historic debts going back to 1999. They were based on the respondent's own self-assessment, which was of his income tax liabilities, and it said it is not clear the respondent is saying he does not owe what would be, at least, sufficient to be over the required threshold for a bankruptcy petition. I was referred to a letter of 30 July 2015 in which it was said that he owed a great deal less than £89,000 but it was not said what, in fact, he did owe.
There is also an issue in relation to the statutory demand. It said that is something which would warrant a cross-appeal. There is no cross-appeal here and I do not propose to deal with that matter today. I ought, also, before turning to the test in relation to an appeal and the issues which arise here, go back and refer to the relevant extracts of the transcript of the hearing before Registrar Briggs on 24 August 2015. The issue in relation to the adjournment was raised and Mr De Freitas said that the Revenue had written to him saying they wanted eight weeks and the Registrar, at page 14D of the bundle and in the transcript, replied:
"Yes. And then the matter needs to come back before the court."
That is understood by all to be a reference to the need for the matter to come back if there were more evidence to be filed. But he went on:
"But before that, I would like to know from you whether or not this is a matter, essentially, awaiting the outcome of an adjudication."
The reply was:
"That is right, sir. In my opinion, this is still very much an ongoing matter. I do not really think we should be at the stage of a bankruptcy petition. You know the debt is an ongoing discussion between myself and the Revenue. It has now reached the stage where it is to be considered by the Adjudicator."
The Registrar said:
"What does the debt arise out of? Is it income tax?"
That was agreed to by Mr De Freitas. He then went on:
"It is a matter for the Adjudicator. The way the system works, apparently, is that there is a two stage internal process and I cannot access the Adjudicator until the two stage process has been exhausted. We are now at that stage and so the matter is to go before the Adjudicator and I do not know how long she will take to deal with this matter but, really, I find it extraordinary that we should be here. I've taken advice."
Then the Registrar said:
"Had you actually filed an adjudication review?"
The reply was:
"I am waiting for one further letter from the Revenue which they referred to in their stage two which they popped in the post to me. I will have that this week. Once I have that, I can then put the matter to the Adjudicator. I have up to six months at the end of the two stage process to put the matter to the Adjudicator. Clearly, I do not want to wait six months. I want to get...
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The Commissioners for HM Revenue and Custsoms v David Gerald Vivian Fitzwilliam De Freitas
...the Prior Petition and, on 6 May 2016, Asplin J (as she then was) dismissed HMRC's appeal against that decision ( HMRC v de Freitas [2016] EWHC 1433 (Ch); [2016] BPIR 1179). Although I have not been provided with a transcript of the hearing before Registrar Briggs, the relevant extracts ar......